KB Securities names top solar stocks amid rising power demand

KB Securities says higher wholesale power prices, driven partly by data-center electricity demand, can more than offset rising solar module costs and borrowing rates. PJM three-year power futures reached $89.5/MWh on September 28, up 37% year over year and 20% from Q2 2026, while a 14% increase in PPA prices would add $36.1 million of revenue for a typical 100MW solar plant versus $3.3 million of added interest expense. The analyst favors Hanwha Solutions, whose U.S.-produced modules benefit from higher prices, and DL Holdings, whose PJM gas-generation assets benefit from rising power prices without comparable increases in Henry Hub gas costs.

Analysis

The investable implication is less a broad solar beta call than a widening spread between merchant/renewing-contract power owners and developers with fixed-price backlogs. PJM scarcity pricing materially favors CEG, VST and NRG in the near term because their existing generation reprices faster, while utility-scale solar developers realize the benefit only as late-stage projects secure new PPAs. For NEE and AES, the upside is concentrated in uncontracted development inventory and regulated capital plans, making execution, interconnection timing and cost-of-capital more important than headline power prices.

Domestic-content solar manufacturers have a more defensible setup than import-dependent module assemblers: FSLR and Hanwha Solutions should retain pricing power if supply normalization reverses, while EPC firms face procurement timing risk if they bid fixed-price projects before component costs reset. The second-order constraint is grid access: data-center load growth increases the value of transmission-connected capacity, favoring developers with interconnection queues and storage co-location over generic solar exposure via TAN. Higher long-end yields can still compress renewable equity multiples even if project-level economics improve; the sector needs evidence of signed PPA repricing and tax-equity availability, not just forward-market strength.

Consensus may be overstating the immediacy of solar cash-flow upside. Most operating assets have locked PPAs, and wholesale forward curves can retreat if AI/data-center buildouts slip, new gas capacity clears, or PJM market reforms alter capacity economics. Over the next 1-3 months, watch announced PPA pricing, project cancellation rates and 10-year yields; over 6-18 months, interconnection approvals and contracted backlog margins determine whether the opportunity becomes earnings accretive.

Key Decisions for Investors

• Prefer a 3-6 month relative-value position: long CEG or VST / short TAN. Merchant nuclear and gas portfolios monetize tightening PJM power balances sooner than solar-heavy constituents; target a 10-15% relative move, with a stop if PJM calendar-strip power falls more than 15% or 10-year yields move decisively above 5.5%.
• Accumulate FSLR on rate-driven weakness rather than chase a sector rally; use a 6-12 month horizon and size only after confirming that booked ASPs and backlog gross-margin guidance are stable. The thesis fails if domestic module premiums narrow materially or U.S. project cancellations accelerate.
• Keep NEE and AES on a PPA-repricing watchlist, not as immediate directional buys. Upgrade only if quarterly disclosures show new contracted projects earning returns above revised WACC and no deterioration in tax-equity funding; a further 50bp rise in long yields without corresponding contracted-price increases is a clear negative signal.
• For investors seeking direct Korea exposure, Hanwha Solutions offers cleaner domestic-module optionality than broad solar ETFs, but require evidence that higher module pricing is contractual rather than policy- or spot-market driven. Limit horizon to 6-12 months and reassess after U.S. tariff/policy developments and margin guidance.